2019 (8) TMI 770 - AT - Income Tax

Taxability of notional rent - income from house property OR business income - as per assessee the property being used as registered office and does not have any other property, the same cannot be considered to be a vacant property - further property was also partly let out - notional rate of rent was enhanced by CIT(A) - HELD THAT:- We are of the view that the company having occupied the property for its own purposes, no notional rent can be added. It may be germane to mention here that this is the only property owned and occupied by the assessee as its registered office. It is not the case of the AO that the assessee company was having some other premises to have its office. A company having been incorporated is legally required to have its registered office irrespective of the fact whether during the year it has carried on any activity or not. There is a statutory requirement under the Companies Act to have a registered office.

We are also in agreement with the contention of the Ld. AR for the assessee that the cost incurred by the company in order to comply with various statutory functions is allowable even in the absence of any business income. In case, a company does not have its own premises then such company will be required to take a premises on rent for its registered office and rent so paid being towards meeting statutory obligation will be allowable expenditure. As against this, a company which owns its own premises and uses such premises for its registered office, it cannot be said that such premises was vacant so as to charge notional rent as its income u/s 23(1).

Further, we are of the view that there is no restriction or condition about the size of the registered office. Thus, merely on the basis of the area of the office being large, the same cannot be said to be vacant property so as to attract the provision of section 23. Further in the preceding assessment years and succeeding years there is no such addition has been made despite there being no change in facts. - appeal of the assessee is allowed